When you’re married, buying a home is usually a shared process with your spouse. But when it comes to getting a mortgage, it sometimes makes sense for only one of you to apply.
Photo by Mark Moz.
If your spouse has credit issues, whether it's accumulated debt or a stolen identity, it might be a better idea for you to apply for the mortgage solo. This could nab you a better rate or just increase your chances of being approved. Magnify Money explains how it works:
What a bank will be most concerned with is the lowest [credit rating], basically calling attention to the very credit problems you wanted to hide. Lack of credit can be just as damaging to your mortgage application as bad credit is…the same goes for high credit usage or a high debt-to-income ratio. High credit usage is considered using 20% or more of your available credit, such as using 20% or more of your credit card limits. A high debt-to-income ratio is when your debt payments are more than 40% -- 50% of your income. Banks have maximum requirements for credit usage and debt-to-income ratios in order to approve a mortgage application.
So if your spouse has any issues with credit, you might consider leaving him or her off the application. That is, unless you need the extra income to qualify. If one of you has had a gap of employment in the past two years, you may need the other to apply, too, despite the credit issues.
There are a couple of things to keep in mind when you apply solo, according to Quicken Loans. First, you may be approved for a smaller loan amount, since you're applying with one income. They add that having a joint bank account with your spouse shouldn't make a difference in the approval process. Finally, be aware that the bank might look at your spouse's debts, even if he or she doesn't apply for the loan with you.
Magnify Money has additional info on how the process works. While not all of it is relevant to Australia, a lot of the tips carry across, so be sure to check out their full post at the link below.
When to Apply for a Mortgage Without Your Spouse [Magnify Money]